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It has been experienced that businesses acting as indirect tax collectors on behalf of the statutory bodies are often confused in determining when is the time for payment of the VAT to the Federal Tax Authority (FTA). For example:

1. At the time when the invoice against the service is raised or

2. At the time when the service is delivered or

3. At the time when the advance has been received from the customer

Just like how determining whether a supply is taxable or not, is important to determine the VAT applicability, similarly, determining the time of supply is very crucial for businesses to know the period in which the output VAT needs to be paid to the Government. The above understanding of the time of supply becomes more complicated when we add construction industry perspective in to it as there are “Advances from customers for the activities to be performed by the contractor and retention money deduction by customers to be released after the project has been delivered satisfactory by the contractor”.

In order to remove the above ambiguity and to appoint one specific date for the taxpayer as well as for tax administration to quantify the amount of tax to be paid for the return period, the UAE VAT law is provided with the concept of 'Time of Supply'

The concept of time of supply provides the manner of determining the date of supply by listing various dates related to supply of goods or services. The earliest occurrence of any such activities should be considered as the time of supply of goods or services on which tax will be due. Accordingly, the taxpayer needs to report and remit VAT in the appropriate return period.

Time of Supply:	Earliest of the following:
Goods	Date of goods transfer or Date of receipt of payments including advance therefore, advances received from customers are taxable in the period of receipt and related VAT must be paid accordingly Date of tax invoice – maximum within 14 days from the date of supply
Services	Date of completion of services Date of receipt of payment Date of tax invoice
**Progressive billing (Construction Industry)	Date of tax Invoice The date of payment is due as shown on the tax Invoice The date of receipt of payment
**This is applicable only if periodic payments or consecutive invoices does not exceed one year from the date of the provision of such goods and services.

The concept of time of supply is very crucial for businesses in determining the date on which the output VAT is due for supply and it subsequently helps in payment of VAT for the respective VAT return period. Any discrepancies in determining the time of supply will have significant impact on the cash outflow of the business. Wrong determination may result in less payment of VAT in specific VAT return and therefore attracting penalties or more VAT payment than required resulting in blockage of cash flows.